Radio 2009: Braving The Crisis The UK Situation

Grant Goddard
radio specialist
www.grantgoddard.co.uk

egta May 2009

Grant Goddard
30 years’ experience in radio management and consultancy  Strategies for successful radio formats and new radio stations:

Grant Goddard
radio specialist

KISS FM (London), Radio Juventus (Hungary), Radio 7 (Moscow), Radio City (India)  Strategies for radio owners and shareholders: EMAP Radio (London), Metromedia (US), Star TV (India), BBC World Service Trust (Cambodia)  Public broadcasting policy: Radio Authority/Ofcom, Competition Commission, Digital Britain  Writer/journalist on radio, music & broadcasting: 1000+ articles published in trade and consumer magazines

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

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Agenda

Grant Goddard
radio specialist

 UK commercial radio revenues  UK commercial radio audiences  UK radio receiver sales  UK commercial radio structure

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

3

Grant Goddard
radio specialist

UK commercial radio revenues

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

4

UK commercial radio revenues
Annual revenues - £m per annum at 2008 prices

Grant Goddard
radio specialist

700 551 603 600 500 47 63 97 121 168 197 180 172 186 205 196 186 200 232 253 264 233 207 219 272 328 400 300 200 100 0 390 434 483

[source: Radio Advertising Bureau, base: RPI] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 5

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

560

680 686 716 737 686 631 622

800

750

UK commercial radio revenues
Annual revenues by source - £m per annum at 2008 prices
800

Grant Goddard
radio specialist

77

87

90

108

700

77

110

600

104

106

500 490 426 419

403

427

340

389

400 276 242

417

350

351

108

200

102

104

133

175

216

300

211

207

200

200

211

192

183

174

177

171

154

166

124

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
6

105

local advertisers
[source: Radio Advertising Bureau, base: RPI] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

115

139

national advertisers

branded content

150

100

182

193

305

106

UK commercial radio revenues
Revenue yield - average £ per 1000 hours listened at 2008 prices
35 29.71 29.74

Grant Goddard
radio specialist

27.18

25.27

26.48

26.67

27.00 2007

30 24.61

28.43

28.48

25 20.67

20 16.21 15.12 15.67

15

10

5

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2008

[source: RAJAR, Radio Advertising Bureau, base: RPI] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 7

12.84

13.29

17.72

22.68

25.14

UK commercial radio revenues

Grant Goddard
radio specialist

Number of analogue radio stations and commercial radio revenues at 2008 prices by year
310 315 350 268 300 242 248 255 250 205 172 200 143 122 150 106 100 50 233 207 219 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 272 126 177 226 272 288 1,000 303 750 716 737 686 631 622 560 500 250 0

750 680 686 603

551 483 390 434

107

328

num ber of analogue local com m ercial radio stations [left axis] com m ercial radio revenues (£m @ 2008 prices) [right axis]
[source: RAJAR, Radio Advertising Bureau, base: RPI] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 8

261

Grant Goddard
radio specialist

UK commercial radio listening

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

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UK total radio listening
Radio weekly reach (% of 15+ population)
100 89.1 90.1 90.9

Grant Goddard
radio specialist

90.5

90.8

89.7

90.0

90.4

89.3

89.7

75

64.4 50

64.1

65.5

65.2

65.2

63.8

62.6

62.9

61.0

61.5

25

0 1999 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 all radio: w eekly reach (%) com m ercial radio: w eekly reach (%)
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 10

UK total radio listening
Radio average usage per listener (hours per week)
30 24.7 24.2 24.5

Grant Goddard
radio specialist

23.6

24.0

24.0

23.9

23.5

22.6

22.3

20

15.2 10

15.5

15.3

15.3

15.4

14.9

14.7

14.6

14.0

13.7

0 1999 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 all radio: average hours/w eek
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 11

com m ercial radio: average hours/w eek

UK commercial radio listening
Commercial radio weekly reach (%) by age
90 78.6 75.5 71.0 69.5 80 70 60 50 40 30 20 10 0 15-24 2000 Q4
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

Grant Goddard
radio specialist

74.3

69.0

64.7

65.6

54.2

56.0

25-34 2002 Q4

35-44 2004 Q4

45-54

55-64 2006 Q4

39.5

65+ 2008 Q4
12

41.2

UK commercial radio listening
Commercial radio average usage per listener (hours per week) by age
20 16.1 15.9 16.0

Grant Goddard
radio specialist

15.3

15.2

14.6

15.1

13.1

13.1

10

5

0 15-24 2000 Q4
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 13

12.8

25-34 2002 Q4

35-44 2004 Q4

45-54

55-64 2006 Q4

65+ 2008 Q4

13.0

15

13.7

UK commercial radio listening

Grant Goddard
radio specialist

300 250 200 150 9 16 19 19 19 19 26 33 38 42 48 49 49 50 60 76 100 50 0 106 107 122 126 143 172 177

205 226 242 248 255 261 268 272 288 310 315 303

Number of analogue local commercial radio stations and commercial radio listening (‘000 hours per annum) by year 50,000,000 350

40,000,000

30,000,000

20,000,000

10,000,000

0 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 num ber of analogue local com m ercial radio stations [left axis] volum e of listening to com m ercial radio ('000 hrs/annum ) [right axis]

[source: RAJAR, Ofcom] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 14

UK commercial radio listening

Grant Goddard
radio specialist

310

315

Number of analogue local commercial radio stations and commercial radio’s share of radio listening (%) by year 100 350
268 272 300 255 250 205 49 122 126 143 43 150 100 50 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0 172 200 177 226 242 248 288 305 80 60 40 42 42 20

50

48

50

49

47

46

45

46

261

45

44

43

43

38

num ber of analogue local com m ercial radio stations [left axis] com m ercial radio % share of total radio listening year-end [right axis]
[source: RAJAR, Ofcom] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 15

UK commercial radio listening
Listening to commercial radio by platform (% of listening)

Grant Goddard
radio specialist

digital: internet, digital: unspecified, 1.9% 3.0% digital: DTV, 4.2% digital: DAB, 9.9% unspecified, 13.2%

Satellite

all analogue, 67.8%

Dial-up

[source: RAJAR, Q4 2008] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 16

20%

40%

60%

80%

0%

[source: RAJAR]

2007Q2 all analogue 2007Q3 all digital unspecified 2007Q4 21.2% 13.6% 9.8% 9.6% 12.5% 12.7% 13.2% 13.8% 16.8% 18.1% 18.4% 18.4% 18.9% 19.0%

UK commercial radio listening
65.0% 69.6% 72.1% 72.0% 69.2% 68.4% 67.8%

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

Commercial radio adult (15+) hours listened by platform (%)

2008Q1 digital: DAB 2008Q2 digital: DTV 2008Q3 2008Q4 digital: internet digital: unspecified 1.4% 1.5% 1.7% 1.9% 1.8% 2.2% 1.9%

6.3% 8.0% 9.0% 9.3% 9.0% 9.2% 9.9% 3.3% 4.3% 4.3% 4.3% 4.5% 4.2% 4.2%

2.8% 3.1% 3.1% 3.1% 3.1% 3.2% 3.0%

Grant Goddard
radio specialist

17

Grant Goddard

UK commercial radio listening
Adult (15+) listening to commercial digital-only radio stations
5.5 5.5 6 5.0 5.1

radio specialist

50% 5.2 4.7 4.6 27% 24% 20% 2008Q3 2008Q4

5 4.0 3.9

40%

3.4

3.5

3.3

3.6

4 3.0 3.0 3.2

36% 33% 30% 28% 26% 30%

3 2.1 2.1 1.9 2.1 2.3

2

2.7

0.6

1

0.7

10%

0 2003Q1 2003Q2 2003Q3 2003Q4 2004Q1 2004Q2 2004Q3 2004Q4 2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2

0%

listening to commercial digital-only radio stations as % of all commercial radio listening [left axis] listening to commercial digital-only radio stations as % of digital listening to commercial radio [right axis]
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 18

Grant Goddard
radio specialist

UK radio receiver sales

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

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UK radio receiver sales
UK radio receiver sales – four quarter moving average (‘000 per annum) DAB receivers as percentage of total receiver sales
12,000

Grant Goddard
radio specialist

8%
951

9% 10%
1,208 1,051

12% 13% 14% 14% 17% 18% 18% 19% 20% 20% 21% 21%
1,407 1,493 1,566 1,575

2,006

2,114

2,174

10,000

1,680

1,734

8,000

10,678

10,611

10,657

10,550

6,000

10,169

9,892

9,495

1,761

1,824

8,209

8,062

8,140

8,227

7,978

4,000

2,000

0 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008

[source: GfK/DRDB]

analogue radio unit s ale s ('000)

7,854

DAB radio unit s ale s ('000)
20

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

7,906

8,030

2,180

UK DAB radio receiver sales
Quarterly DAB receiver sales (‘000 per quarter)
964 1,000 179 162 153 681 750 121 101 510 500 382 363 338 490 119 796

Grant Goddard
radio specialist

200 865 357 366 180 160 140 120 100 80

308

294

245

287

299

60 40

183

250

205

28 34 38 40 5 17 13 4 18 21 19 1 -10

134

111

102

20 0 -20

0 2003 Q2 2003 Q3 2003 Q4 2004 Q1 2004 Q2 2004 Q3 2004 Q4 2005 Q1 2005 Q2 2005 Q3 2005 Q4 2006 Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4

39

53 quarterly DAB receiver sales ('000) [left axis]

year-on-year change (%) [right axis]

[source: GfK/DRDB] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 21

Grant Goddard
radio specialist

UK commercial radio structure

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

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UK commercial radio listening
45 40.0 40 35 30 25 20 15 10 5 Guardian Media Group 0 Global Radio Bauer Radio UTV Radio 11.4 6.8 3.2 1.7 Lincs FM Group 1.3 The Local Radio Company 1.1 Planet Rock 0.9 UKRD 0.8 Sunrise Radio 0.7 Cumberland News Group 0.7 Tindle Radio 0.4 Kent Messenger Radio 0.4 Town & Country Broadcasting 0.2 Northern Media Group 0.1 Forward Media 0.1 Absolute Radio International 25.8

Grant Goddard
radio specialist

Market share of commercial radio owner – Q4 2008 (% of total commercial radio listening)

0.1 Midwest Radio

0.0 Adventure Radio

0.0 Midland News Association

[source: RAJAR, grey columns are publicly quoted companies] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

TIML Golden Square

23

UK commercial radio listening

Grant Goddard
radio specialist

Change in market share of local commercial radio stations Q4 2001 to Q4 2008 (absolute change in % share of listening) by size of station survey area (‘000 population 15+)
20 absolute change in % share

10

0 0 4,000 8,000 12,000 station survey area ('000)

-10

-20
[source: RAJAR] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 24

UK local commercial radio station closures
Local commercial radio station closures since 2006

Grant Goddard
radio specialist

station

market

owner

launch date

closure date

Star FM River FM Fen Radio Gold Talk 107 Abbey FM KCR Time 106.8 South London Radio Pennine FM Valleys Radio

Stroud Livingston Wisbech Exeter/Torbay Edinburgh Barrow Knowsley Thamesmead Lewisham Huddersfield South Wales

UKRD Kingdom Radio Group UKRD Global Radio UTV CN/TLRC/Radio Business Polaris Media Sunrise Radio Sunrise Radio John Harding UTV

29 November 1998 29 September 2006 3 September 2003 29 January 2007 4 November 2003 31 July 2008 1 January 1995 31 August 2008 14 February 2006 23 December 2008 16 October 2006 30 January 2009 16 June 2001 1 April 2009 18 March 1990 3 April 2009 8 February 1999 3 April 2009 1 March 1998 16 April 2009 23 November 1996 30 April 2009

Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009

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UK commercial radio station numbers
300

Grant Goddard
radio specialist

Number of operational local commercial radio stations by coverage area size (15+ adults)

250

200

150

100

50

0 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 <250k
[source: Ofcom] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 26

250k-500k

>500k

UK commercial radio station profitability
Operating profits of local commercial radio stations by market size (£ ‘000 per annum)

Grant Goddard
radio specialist

1,600 1,400

percentage of total num ber of com m ercial radio stations ………..……….63%........................ .....13%..... …...11%..... ………...13%............ 1,400 1,200

1,200 1,000 800 600 400 400 200 -3 0 -200 <50k
[source: Ofcom, 2007] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 27

865

65 -20

50-150k

150-250k

250-500k

500k-1m

1-5m

>5m

UK commercial radio profitability

Grant Goddard
radio specialist

A recent internal report commissioned by RadioCentre, the commercial radio trade body, found that: “current estimates suggest the industry as a whole is now loss-making.” It noted that: “the larger groups are marginally profitable before interest payments are taken into account (these payments are very substantial in some instances); all of the smaller groups are either marginally profitable or loss-making.”

[source: Ingenious Consulting. Commercial Radio: The Drive to Digital, January 2009, p.2.] ] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 28

UK commercial radio

Grant Goddard
radio specialist

A recent report on the future of commercial radio commissioned by the UK government noted: “…. there is little doubt that, in the immediate future, the industry is likely to pass through a difficult period of station closures and group re-structuring. Sadly, this is a reality in a market where too many radio stations compete for a limited amount of advertising revenues. I believe that there is a real possibility of at least 50 local stations closing down during the next two years, a phenomenon that will not be prevented by either regulatory or government intervention.”

[source: John Myers, An Independent Review Of The Rules Governing Local Content On Commercial Radio, April 2009] ] Radio 2009: Braving The Crisis – The UK Situation © Grant Goddard: May 2009 29